1993 (2) TMI 198 - AT - Central Excise

Summary

Issues Involved:
1. Classification and duty liability of polyethylene granules and vulcanizable polyethylene.
2. Whether the process of adding dicumyl peroxide to polyethylene granules constitutes "manufacture."
3. Applicability of the "later the better" principle for excise duty collection.
4. Interpretation of relevant case laws and chemical properties.

Detailed Analysis:

1. Classification and Duty Liability:
The primary issue revolves around whether polyethylene granules used in manufacturing vulcanizable polyethylene should be subject to duty. The Assistant Collector initially held that no duty should be paid at the stage of production of polyethylene granules, and the liability should be discharged on the final product, vulcanizable polyethylene. However, the Collector (Appeals) decided that if duty has been paid on polyethylene granules, no further liability arises after mixing the anti-oxidant.

2. Process of Adding Dicumyl Peroxide and "Manufacture":
The core question is whether the process of adding dicumyl peroxide to polyethylene granules results in "manufacture" as defined by the Supreme Court in the Delhi Cloth and General Mills case. The Collector (Appeals) concluded that adding an anti-oxidant does not result in the manufacture of new goods, as no new substance comes into existence. The Department, however, argued that the coating of dicumyl peroxide imparts a different property to the polyethylene granules, thus changing their chemical property and resulting in a new product.

3. Applicability of "Later the Better" Principle:
The principle of "later the better" for excise duty collection was also discussed. The Department argued that duty should be charged on the final product, vulcanizable polyethylene, rather than at the stage of polyethylene granules. The Tribunal supported this view, stating that the liability of payment of duty arises only at the final stage when the product is commercially distinct.

4. Interpretation of Relevant Case Laws and Chemical Properties:
Several case laws were cited by both parties to support their arguments. The Department relied on decisions such as Inarco Ltd., Air Control Systems, and Hindustan Polymers, arguing that the addition of dicumyl peroxide imparts new properties to polyethylene, thus constituting manufacture. The respondents cited cases like Union of India v. Delhi Cloth & General Mills, Asian Cables Corporation, and Crescent Chemical Corporation, arguing that no new product with a distinctive name, character, or use emerges from merely adding dicumyl peroxide.

Conclusion:
The Tribunal concluded that the process of adding dicumyl peroxide to polyethylene granules does result in the manufacture of a new product, vulcanizable polyethylene, which has distinct properties and uses compared to unvulcanized polyethylene. Therefore, the duty liability should be discharged on the final product. The order of the Collector (Appeals) was set aside, and the appeal of the Department was allowed.